Sri Lanka in talks for $100 million emergency funding from Beijing-backed bank

COLOMBO: Sri Lanka’s finance ministry said on Sunday that the China-backed Asian Infrastructure Investment Bank is considering providing $100 million in emergency relief.

Sri Lanka has asked the lender for foreign-exchange liquidity support for state banks, according to a statement.

The South Asian island’s economy is in danger, with usable foreign reserves down to $50 million, according to Finance Minister Ali Sabry, after being hit hard by the epidemic, rising oil prices, and populist tax cuts by President Gotabaya Rajapaksa’s government.

Thousands of people have taken to the streets in almost a month of generally peaceful protests due to shortages of imported food, fuel, and medicines. On Friday, Rajapaksa proclaimed his second state of emergency in five weeks.

China provides the majority of money to the multinational AIIB, which was established in 2014 to promote infrastructure investment across Asia.

China is Sri Lanka’s largest bilateral lender, with a $6.5 billion outstanding balance primarily used for large infrastructure projects such as highways, a port, an airport, and a coal power plant over the last decade.

To increase its reserves, Beijing has offered Sri Lanka a $1.3 billion syndicated loan and a $1.5 billion yuan-denominated swap. The two countries are negotiating a $1.5 billion credit line and a new $1 billion syndicated loan.

After suspending some external debt obligations in April, Colombo announced this month that talks on restructuring Chinese loans had begun.